Citigroup is a global financial powerhouse that orchestrates the movement of over $6 trillion in daily transaction volume, serving as the essential connective tissue for the world’s most complex multinational corporations. The firm services 90% of the Fortune 500 through a proprietary network that includes direct membership to over 270 cash-clearing centers and a footprint that spans 94 countries. After a checkered history operating as an overly complex, disjointed firm, it has taken steps to streamline operations, resulting in organization across five segments: services, markets, banking, wealth, and US personal banking.

Citigroup is one of world's largest banks, with global consumer banking, corporate banking, and investment banking operations. The company has approximately 200 million customer accounts and does business in more than 160 countries and jurisdictions.

Market Outlook for 2026: Continued Volatility Ahead The off-again, on-again hostilities between Iran and the U.S. exemplify the uncertainty that has carried across the first half of 2026 and into the second. The stock market ended the first half on an up note, powered by the June 17, 2026, signing of the Memorandum of Understanding (MoU) between the two countries. One month later, much of that good feeling is gone as drone and missile attacks broaden and intensify. U.S. gasoline prices, which finally got back below $4.00 per gallon on MoU optimism, are rising and tracking crude oil prices higher. The darker geopolitical mood has served as a backdrop for profit-taking in formerly favored parts of the AI trade, most notably semiconductors and data storage stocks. Bouts of profit-taking are normal, and many investors would say they are a necessary prescription for long-term bull-market health. The stock market remains broadly positive for 2026, but it has not been a runaway market. The mid-year 2026 gain of about 10% for the S&P 500 compares to a 14.5% mid-year gain in 2024 and 5.5% mid-year gain in 2025. Those numbers should stand as a reminder that uncertainty in the outlook is nothing new. Market Outlook The S&P 500 advanced 16.4% for all of 2025, following capital appreciation of 24.2% in 2023 and 23.3% in 2024. The 2026 trading year is off to a positive if uneven start, with stock-market momentum tag-teaming between traditional growth leadership and formerly out-favor themes including defensive, cyclical, rate-sensitive, and inflation-hedge. The S&P 500 was up just under 10% at midyear 2026, advancing through four months of war and fears that war-related energy inflation has yet to ripple through shipping, agriculture, and other parts of the economy. Other concerns include tariff-related impacts, stubbornly high inflation and interest rates, and GDP growth and earnings growth potentially too reliant on the AI revolution. The 2025 trading year was aided by optimism that the new administration in Washington would be more business-friendly. For 2026, investors and businesses remain optimistic that tax cuts under the One Big Beautiful Bill will partly offset tariff impacts and higher consumer gasoline costs resulting from the war. President Trump, who in 2025 signaled a shift in focus from Europe and Asia to the Western Hemisphere, acted on that shift early in 2026 by seizing Venezuelan President Maduro and pledging to govern that country remotely. Success in the Venezuelan operation may have influenced the president's assessment of the risks of attacking Iran. As well, the U.S. is now looking closer to home, specifically to regime change in Cuba. Still, the inability of the U.S. to relax Iran's iron grip on the Strait of Hormuz while depleting stocks of its most advanced weapons systems may have shifted perceptions of the geopolitical power balance. As the focus of the federal government shifts away from Europe and Asia and to the Middle East, and as the U.S. concentrates on its own hemisphere, Russia and China may seek to expand their respective spheres of influence. Late In 2025, we issued key forecasts for 2026 related to economic growth, employment, interest rates, earnings growth, and the outlook for the ongoing bull market. We have adjusted some of these forecasts due to the war with Iran and other factors, while maintaining our overall outlook. We expect the U.S. economy to continue growing in 2026, fueled by an employed and resilient consumer and solid corporate investments led by AI adoption. Inflation and high financing rates continue to weigh on consumer spending, particularly for those on the bottom leg of the K-shaped economy, as they are disproportionately impacted by war-related energy cost inflation. More-prosperous consumers on the upper leg of the K continue to benefit from past and ongoing appreciation in financial assets and home values. The overall employment environment is less likely to see outsized impacts from policy changes such as the DOGE cuts of winter and spring 2025. We now look for nonfarm payrolls growth to average about 50,000-100,000 per month in 2026, with a bias to the upside. That is better than our forecast 50,000 average heading into 2026. We now estimate that breakeven employment growth, required to hold the unemployment rate steady, is in the 90,000 per month range. On that basis, we believe the unemployment rate could remain below 4.5% for 2026. Corporate spending was super-charged by AI investments in 2025, and we believe capex can grow at least at the 4.5% historical average in 2026 - and likely higher. We also look for corporate investment to partly offset a cautious consumer, tariff impacts, a weak housing market, and subdued government spending. Measures of the commercial and industrial economy remain consistent with ongoing growth. With mortgage rates elevated and despite pent-up demand, we expect housing's contribution to U.S. economic growth to be below average in 2026. Argus Chief Economist Chris Graja, CFA, raised his GDP forecasts based on strength in AI investment and ongoing consumer resilience. Argus is now forecasting 2026 GDP growth of 2.3%, raised from 2.1%. The Argus GDP forecast for 2027 is for growth of 2.4%, raised from 2.0%. The second quarter of 2026 was notable for a change in leadership at the Federal Reserve. Once regarded as an inflation hawk, new Fed Chair Kevin Warsh is now seen as an inflation dove, or one who prioritizes economic growth and full employment over keeping inflation at a specified level. Even before the war with Iran, the Fed was in a tough spot trying to honor its dual mandate of keeping the work force fully employed and holding inflation near it 2% target range. The White House appears to recognize the challenges facing the new Fed chair and has backed off calls for an immediate rate reduction. The twos-10s slope in the yield curve tightened to 28 basis points (bps) at the end of June 2026 from 69 bps at year-end 2025 - the steepest since 2021, before the Fed began its fight against inflation. The still positively-sloped yield curve is a solid indicator for economic growth. The majority of central bankers, who in the pre-war period supported one quarter-point rate cut in 2026, may now support raising rates in 2026. Argus Fixed Income Strategist Kevin Heal expects no change in interest rate policy in 2026. Earnings growth for calendar 1Q26 has reset the outlook for earnings growth for all of 2026. In June 2026, we raised our forecast for S&P 500 earnings from continuing operations to $340 per share for 2026 from a prior $315; our new estimate is consistent with mid- to high-20% annual EPS growth. We also raised our 2027 EPS forecast for the S&P 500 to $390 per share from a prior $363, which is consistent with mid-teens growth in corporate profits. U.S. companies appear to have at least partially adapted to tariffs by shifting supply chains to local sources and flexing variable costs when possible. Given that large technology companies increasingly drive overall EPS growth, we look for further margin expansion going forward. We take multiple approaches to equity valuation. Our Stock/Bond Barometer is indicating that the two major asset classes are trading near parity on valuation. The output of the model is expressed in standard deviation to the mean, or sigma. Going back to 1960, the mean reading is a modest premium for stocks of 0.18 sigma, with a standard deviation of 1.07. The current valuation is a 0.60 premium for stocks - not a discount, but within the fair value range. The forward P/E ratio of 20-times for the S&P 500 is near the midpoint of the normal range of 15-24 and down from low- to mid-20s readings in 2024-25. The ratio of the S&P 500 price to an ounce of gold is 1.7, within the normal range. And the gap between the S&P 500 earnings yield and the 10-year Treasury yield is 400 basis points, near the historical average. These valuation measures suggest that the S&P 500, which thus far remains in the bull market dating back to October 2022, is not meaningfully overvalued. Since the launch of ChatGPT in November 2022, the AI trade has driven the market. Investors periodically have taken profits in AI stocks on concerns about an AI bubble, fears that AI would cause massive job displacement, or concerns that return on AI investment will disappoint. Unlike past bubbles built on phantom metrics, the AI revolution is grounded in real infrastructure investment, particularly as spending broadens out from hyperscalers to large enterprise, sovereign, and neo-cloud customers. Amid swirling geopolitical and economic developments, we believe corporate earnings trends and still-favorable stock valuations can support a positive 2026 for stocks. In our revised base case for 2026, we are modeling GDP advancing in the 2% range, unemployment remaining the mid- to low-4% range, and corporate earnings growing at high-teen to low-20% rates. It may be a challenge to get core PCE inflation to the mid-2% range by year-end, but we do not expect it to explode higher to 4% or above. We expect the Fed to neither raise nor cut the fed funds rate in 2026. The current bull market is almost four years old. Over this period the S&P 500 has risen nearly 110% as the rally has withstood high inflation, economic uncertainty, implementation of tariffs, a government shutdown, major shifts in the direction of U.S. domestic and foreign policy, and now the war with Iran. The 13 prior bull markets since World War II averaged capital appreciation of 164% over an average span of 57 months, or just under five years. The five bull markets since 1980 have generated higher returns (about 240%) over longer periods (about six years). In addition to the risks noted above, the S&P 500 in 2026 faces the statistical difficulty of sustaining forward momentum after three straight years of double-digit gains. We also note that 2026 is the second year in the presidential cycle, traditionally the weakest stock-market year (by far) of the four years. Entering the second half of 2026, we see room for further appreciation in both traditional growth leaders and for rotation beneficiaries in inflation-hedge, rate-sensitive, defensive, and cyclical categories. In our revised base case, we believe the bull market continues and the S&P 500 can advance an additional 5%-7% for the 2026 year, for a total 14%-16% gain within a broader and more-balanced market. Conclusion July usually is a strong market month. But nothing is usual this time around, amid historical AI spending, a new Fed chairman with a potentially new agenda, uncertainty around the direction of interest rates, and sure-to-be-contentious midterm elections just over the horizon. Before we get to the mid-terms, the calendar 2Q26 earnings season is likely to deliver another round of exceptional and possibly record earnings. While investors will focus intently on guidance rather past results, the high level of earnings supports favorable valuations. Consumers remain fully employed and wages are rising, albeit no longer fast enough to keep up with inflation. We have made modest changes to our base case outlook for 2026 to accommodate the prevailing trends in the global economy. At the same time, we remain guardedly optimistic that stocks can continue moving forward across the back half of 2026.

Citigroup is a global financial powerhouse that orchestrates the movement of $5 trillion in daily transaction volume, serving as the essential connective tissue for the world’s most complex multinational corporations. The firm remains a leader on the global stage, servicing 90% of the Fortune 500 through a proprietary network that includes direct membership to over 270 cash-clearing centers and a footprint that spans 94 countries. After a checkered history operating as an overly complex, disjointed firm, steps have been taken to streamline operations, resulting in organization across five segments: services, markets, banking, wealth, and US personal banking.